Entrepreneurial activity affected by degree of states' economic freedom

Oct 15, 2008

A new study in the journal Entrepreneurship Theory and Practice examines how entrepreneurial activity and level of employment in U.S. service industries respond to changes in the degree of economic freedom among states. Researchers found that the relationship between entrepreneurial outcomes and economic freedom varies significantly by industry.

Stephan F. Gohmann, Bradley K. Hobbs, and Myra McCrickard used data from economic freedom indexes for each state in the U.S. and from the U.S. Census Bureau to examine the effects of economic freedom on industry growth rates.

Results present the following dichotomy: some service industries exhibit firm and employment growth as economic freedom rises while other service industries grow as economic freedom declines.

For example, business and personal services firms are relatively small, and states with greater economic freedom typically have fewer regulations that lower the costs for smaller firms. Consequently, entrepreneurs are more able to grow these services during times of increased economic freedom.

Conversely, legal services grow in response to decreased economic freedom and heightened government regulation because firms affected by these policies increasingly require legal services. Similarly, health and social services respond to demand generated from government programs and grow as the government's purview broadens.

As such results relate to government policy, the authors conclude that: "Policy makers should consider both the spillover effects of targeted policies as well as the direct effects of changes in economic freedom on entrepreneurial decision making."

Source: Wiley

Explore further: Will rapprochement mean new research collaborations between Cuba and the U.S.?

add to favorites email to friend print save as pdf

Related Stories

Children are not for sale

Dec 08, 2014

"Children are not for sale, that's a social taboo", says the sociologist Christian Tribowski. In his dissertation at the Max Planck Institute for the Study of Societies he is using intercountry adoptions ...

Amnesty feels 'chill' from China Internet meeting

Nov 18, 2014

Rights group Amnesty International on Tuesday described a major Chinese-organised Internet conference as chilling, calling it an attempt to have a greater say in the rules that govern the web.

Making cities more accessible for everyone

Oct 31, 2014

Ron Buliung's interest in urban design initially started with his travels to Europe and India where he saw how different cities dealt with issues such as space, wealth, poverty, street life, congestion and ...

Recommended for you

Study: Alcatraz inmates could have survived escape

Dec 17, 2014

The three prisoners who escaped from Alcatraz in one of the most famous and elaborate prison breaks in U.S. history could have survived and made it to land, scientists concluded in a recent study.

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.